Note 6 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 6 — STOCK-BASED COMPENSATION

The 2004 Incentive Compensation Plan

In 2004, the Company’s Board of Directors adopted the 2004 Incentive Compensation Plan (“2004 Incentive Plan”), which provides for the grant of the following types of awards: incentive stock options, non-qualified stock options, restricted stock, stock appreciation rights (“SARs”), stock units, performance awards, phantom stock, incentive bonuses, and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the 2004 Incentive Plan, a total of 3,750,000 shares of the Company’s common stock have been reserved for issuance, all of which could be issued as options or as other forms of awards. Options and SARs granted to employees under the 2004 Incentive Plan cliff vest and are exercisable from the grant date as follows: 25% after 24 months, 25% after 36 months, and the remaining 50% after 48 months. Options granted to non-employee directors under the 2004 Incentive Plan cliff vest and become fully exercisable one year after the grant date. Vested shares may be exercised for up to ten years from the date of grant. The shares of common stock will be issued upon exercise of options or SARs from the Company’s authorized share capital. The 2004 Incentive Plan expired in May 2012 upon adoption of the 2012 Incentive Plan, except as to share based awards outstanding on that date.

The 2012 Incentive Compensation Plan

In May 2012, the Company’s shareholders adopted the 2012 Incentive Compensation Plan (“2012 Incentive Plan”), which provides for the grant of the following types of awards: incentive stock options, non-qualified stock options, restricted stock, SARs, stock units, performance awards, phantom stock, incentive bonuses, and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the 2012 Incentive Plan, a total of 4,000,000 shares of the Company’s common stock have been reserved for issuance, all of which could be issued as options or as other forms of awards. Options and SARs granted to employees under the 2012 Incentive Plan will vest and become exercisable as follows: 25% vest 24 months after the grant date, an additional 25% vest 36 months after the grant date, and the remaining 50% vest 48 months after the grant date. Options granted to non-employee directors under the 2012 Incentive Plan will vest and become fully exercisable one year after the grant date. Vested stock-based awards may be exercised for up to ten years from the date of grant. Upon exercise, SARs entitle the recipient to receive shares of common stock equal to the increase in the fair market value of the Company’s common stock from the grant date to the date of exercise. The shares of common stock will be issued upon exercise of options or SARs from the Company’s authorized share capital.

On April 3, 2013, the Company granted its Chief Financial Officer 120,000 SARs under the 2012 Incentive Plan. The exercise price of each SAR is $20.54, which represented the fair market value of the Company’s common stock on the date of grant. Such SARs will expire six years from the date of grant, and will vest in equal annual installments over a period of four years from the grant date.

The fair value of each SAR on the date of grant was $5.64. The Company calculated the fair value of each SAR on the date of grant using the Black-Scholes valuation model based on the following assumptions:

Risk-free interest rates	0.57%
Expected lives (in years)	4.25
Dividend yield	0.80%
Expected volatility	35.76%
Forfeiture rate	0.00%

On June 4, 2013, the Company granted its employees 1,150,100 SARs under the 2012 Incentive Plan. The exercise price of each SAR is $23.34, which represented the fair market value of the Company’s common stock on the date of grant. Such SARs will expire six years from the date of grant, and will vest fully after four years starting from the grant date, 25% at the end of the second year, 25% at the end of the third year, and 50% at the end of the fourth year.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The fair value of each SAR on the date of grant was $7.21. The Company calculated the fair value of each SAR on the date of grant using the Black-Scholes valuation model based on the following assumptions:

Risk-free interest rates	0.77%
Expected lives (in years)	4.625
Dividend yield	0.70%
Expected volatility	38.13%
Forfeiture rate	6.37%

During the third quarter of 2013, the Company evaluated the trends in the stock-based award forfeiture rate and determined that the actual rate is 7.46%. This represents an increase of 1.09% from the estimate made a year earlier in the third quarter of 2012. As a result of the estimated forfeiture rate increase, the stock based compensation expense decreased by an immaterial amount.